Confectionery in New Zealand

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Executive Summary

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CHOCOLATE CONFECTIONERY

Trends

Growing concerns emerged in 2015 about the West African Ebola crisis triggering sharp increases in the price of chocolate. Leading player Cadbury Confectionery Ltd imports 60% of its chocolate from Ghana, while competitor Nestlé New Zealand Ltd imports its entire supply of cocoa for chocolate that is sold in New Zealand from the Ivory Coast. Both these countries border Liberia and Guinea: two of the countries worst affected thus far by the Ebola crisis. Should the virus spread into these countries, the labour supply could be greatly affected, impacting the ability to export from these major cocoa-producing countries. Smaller players may also be affected as the major players shift their supply chain to Asia, the South Pacific and South America, outperforming the smaller players. The pressures placed on chocolate prices due to the Ebola crisis were in addition to existing pressures impacting commodity prices with strong demand for cocoa and limited supply.

Competitive Landscape

Cadbury Confectionery Ltd led chocolate confectionery in 2015 with 50% value share, a decline of one percentage point from 2014. The company held leading positions throughout chocolate confectionery. Despite the company’s leading position, there was a small consumer backlash in early 2015 due to the announcement of a reduction in size of its tablets from 220g to 200g due to an increase in manufacturing costs and to hedge its pricing structures should its supply chain be affected by the Ebola crisis in West Africa. Shortly after this announcement, the company announced that its popular Cadbury Crème Egg would be subjected to a recipe change, switching from dairy milk chocolate to standard cocoa mix chocolate. While this change was announced in the UK, New Zealand stock is imported from the UK and Cadbury confirmed New Zealand consumers would be affected by the change. However, Cadbury did manage some positive publicity, giving away 31,000 bars of chocolate in Auckland suburb Pukekohe prior to Christmas as part of a marketing campaign with the company saying the town embodies the spirit of community. Six pallets, equating to 2.5 tonnes of chocolate were gifted, enough chocolate bars for every resident. In addition, iconic bagged selflines/softlines brand Pineapple Lumps was voted second most trusted New Zealand brand in late 2014.

Prospects

The main trend impacting chocolate confectionery over the forecast period is expected to be the impact of the Ebola crisis on cocoa and chocolate prices. While this had not yet spread to any of the main cocoa producing countries at the time of writing, should the situation change, it is expected to impact chocolate prices and consumer demand significantly.

GUM

Trends

While flavour development characterised gum in 2015, mint, citrus and berry continued to influence this trend. In line with oral health and general health and wellness concerns, sugar free variants were driving new product developments.

Competitive Landscape

With 93% value share, The Wrigley Co (NZ) Ltd continued to have a monopoly on gum in New Zealand. The company enjoys strong distribution and merchandising capabilities through all major channels including supermarkets, forecourt retailers and convenience stores. The company’s strong performance was led by its Extra brand with 48% value share, and comprised a number of sub-brand variants. Other brands included 5 Gum, PK, Eclipse, Hubba Bubba and Juicy Fruit. The company continued with the Extra TV commercial emphasising the “Eat, drink, chew” slogan.

Prospects

Oral health and health and wellness concerns are expected to continue to characterise gum over the forecast period. Accordingly, sugar-free gum is expected to be the focal point for new product developments. While functional gum was not successful in the past, changing consumer attitudes may result in a renewed push by players.

SUGAR CONFECTIONERY

Trends

Children’s preferences continued to characterise sugar confectionery in 2015, with softer textured products, along with the sour taste profile which was popular amongst children. Key aspects of sugar confectionery products were tailored to children’s preferences, from flavour profiles to child-friendly packaging. Consequently, health and wellness concerns increased among parents and this influence was keenly felt in 2015.

Competitive Landscape

With 29% value share, Cadbury Confectionery Ltd led sugar confectionery in 2015. Cadbury’s strong performance was led by its Pascall brand which held 18% value share, the same as 2014, and its The Natural Confectionery Co which increased its value share marginally to 6% due to effective in-store merchandising and positive association with health and wellness trend. In late 2014, Cadbury Confectionery Ltd launched Sour Patch into the New Zealand market. The sour confectionery, which had huge success in the US, was launched in conjunction with an extensive social media campaign designed to engage its target demographic, including using the hash tag #sourpatchselfie on Instagram.

Prospects

Health and wellness is expected to continue to impact sugar confectionery over the forecast period, as parents become increasingly aware of the sugar content of the treats they provide their children. Combined with an ageing population, as well as overall concern regarding oral health, it is expected that softer textured sugar-free (or reduced sugar variants) offerings will increase over the forecast period.

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